Search Remains Resilient, But Spending Slumps At the End Of Q3
This story was written by Tameka Kee.
Will paid search ride out the recession? Ask execs from Google (NSDQ: GOOG), Yahoo (NSDQ: YHOO), or one of the many search firms out there and you;re likely to get a resounding yes. But the latest research brief from RBC Capital Markets (in conjunction with search tech firm SearchIgnite) reveals that paid search isn't exactly immune to the macroeconomic climate. Retail advertisers, in particular, slashed their search budgets at the end of the quarter, and overall growth is trending downward.
Retailers increased their search spend over Q307, but intra-quarter figures show budgets are declining. Retailers kicked off Q308 with a bang, spending 19 percent more on search in July than they did in the previous year. That year-over-year growth sputtered to just about 2 percent in August, followed by a sharp drop in September, when advertisers spent 10 percent less than they did last year. The cutbacks came despite a slight uptick in both conversion rates and the average value of each consumer's order in August and September. RBC Internet/Software analyst Ross Sandler said that the trend may have a more "significant impact" come Q4.
Still, overall spending in Q3 was up nearly 27 percent year-over-year, leading Sandler to conclude that "U.S. paid search spend remained strong in Q3 despite broader economic troubles." Quarter-to-quarter growth was relatively flat at 1.6 percent, down from 3.3 percent in Q2. But that's actually consistent with the Q2 vs. Q3 growth reported in 2007.
And say what you want about Google's fledgling attempts to monetize YouTube, and break into display and traditional advertising, but there's no disputing the giant's dominance when it comes to search. Google garnered more than 72 percent of SearchIgnite's client spending, up 2 percent from the previous quarter. That increase came directly at the expense of Yahoowhose market share was down 1 percent - -while Microsoft's (NSDQ: MSFT) share remained relatively flat.
By Tameka Kee